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Mortgage Rates Hold Steady After Early March Drop

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Mortgage rates dropped significantly at the start of March before stabilizing, with the average 30-year fixed-rate mortgage settling at 6.65%, according to Freddie Mac. This marks a 19-basis-point (bps) decline from February. Meanwhile, the 15-year fixed-rate mortgage fell by 20 bps to 5.83%.

The drop in long-term borrowing costs was driven by a 24-bps decline in the 10-year Treasury yield, which averaged 4.28% in March. This decline provided a boost to the housing market—new home sales increased 5.1% year-over-year in February, while the participation of first-time homebuyer of existing homes rose 26% over the same period. However, existing home sales saw a slight dip from last February.

The decrease in Treasury yields reflects growing concerns about an economic slowdown, particularly as shifts in tariff policy weaken consumer confidence. Despite this, the labor market remained resilient in February, posting steady job gains even as the unemployment rate ticked up slightly. The strength of upcoming jobs reports will be critical in assessing whether recession risks are intensifying.

At the latest FOMC meeting, the Federal Reserve held interest rates steady but revised its 2025 economic projections: expected GDP growth was lowered to 1.7% (down from 2.1% in December 2024) and the projected unemployment rate was raised to 4.4%, up 0.1 percentage point from previous estimates.

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Slight Decline in Rates Helps New Home Sales to Edge Higher in February

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A slight decline in mortgage rates and limited existing inventory helped new home sales to edge higher in February even as housing affordability challenges continue to act as a strong headwind on the market.

Sales of newly built, single-family homes in February increased 1.8% to a 676,000 seasonally adjusted annual rate from a revised January number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in February was up 5.1% compared to a year earlier.

New home sales have been roughly flat thus far in 2025, as ongoing limited inventory of existing homes in many markets continues to support the need for new homes. Lower mortgage rates helped to lift demand in February, despite other near-term risks such as tariff issues and affordability concerns.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the February reading of 676,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in February continued to rise to a level of 500,000, up 7.5% compared to a year earlier. This represents an 8.9 months’ supply at the current building pace. The count of completed, ready-to-occupy homes available for sale increased again, rising to 119,000, up 35% from a year ago and marking the highest count since mid-2009. 

However, after accounting for a low 3.4 months’ supply for the existing single-family market, total market inventory (new and existing homes) stands at a lean 4.2 months’ supply per NAHB estimates. A balanced market is typically defined as a 6 month’s supply.

The median new home sale price in February was $414,500, down 1.5% from a year ago. The count of sales was supported by a gain of transactions priced between $300,000 and $400,000 in February.

Regionally, on a year-to-date basis, new home sales are up 12.4% in the South but down 6.7% in the West, 13.5% in the Midwest and 50.8% in the Northeast.

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Lower Mortgage Rates, Better Affordability

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As housing affordability remains a critical challenge across the country, mortgage rates continue to play a central role in shaping homebuying power. Mortgage rates stayed elevated throughout 2023 and early 2024. Recent data, however, shows a modest decline in mortgage rates. Even slight declines can have a significant impact on housing affordability, pricing more households back into the market. New NAHB Priced-Out Estimates show how home price increases affect housing affordability in 2025. This post presents details regarding how interest rates affect the number of households that can afford a median priced new home.

At the beginning of 2025, with the average 30-year fixed mortgage rate at 7%, around 31.5 million households could afford a median-priced home at $459,826. This requires a household income of $147,433 by the front-end underwriting standards[1]. In contrast, if the average mortgage rates had remained at the recent peak of 7.62% in October 2023, only 28.7 million households would have qualified. This 62-basis point decline has effectively priced 2.8 million additional households into the market, expanding homeownership opportunities.

The table below shows how affordability changes with each 25 basis-point increase in interest rates, from 3.75% to 8.25% for a median-priced home at $459,826. The minimum required income with a 3.75% mortgage rate is $110,270. In contrast, a mortgage rate of 8.25%, increases the required income to $163,068, pushing millions of households out of the market.

As rates climb higher, the priced-out effect diminishes. When interest rates increase from 6.5% to 6.75%, around 1.13 million households are priced out of the market, unable to meet the higher income threshold required to afford the increased monthly payments. However, an increase from 7.75% to 8% would squeeze about 850,000 households out of the market.

This exemplifies that when interest rates are relatively low, a 25 basis-point increase has a much larger impact. It is because it affects a broader portion of households in the middle of the income distribution. For example, if the mortgage interest rate decreases from 5.25% to 5%, around 1.5 million more households will qualify the mortgage for the new homes at the median price of $459,826. This indicates lower interest rates can unlock homeownership opportunities for a substantial number of households.

[1] . The sum of monthly payment, including the principal amount, loan interest, property tax, homeowners’ property and private mortgage insurance premiums (PITI), is no more than 28 percent of monthly gross household income.

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Multifamily Completions Rise Again Pushing Absorption Rates Lower

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The percentage of new apartment units that were absorbed within three months after completion continued to trend downwards, according to the Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA). The survey covers new units in multifamily residential buildings with five or more units. The number of new multifamily units completed reached a new peak in the third quarter of 2024, its third straight quarter recording a record high number of completions.

Apartments

The percentage of apartments absorbed within three months has fallen significantly from its peak of 75% in the third quarter of 2021, as shown in the graph above. Currently, the rate stands at 50% which is coupled with an uptick in completions, as the SOMA estimates show a new high of completions at 143,600 units in the third quarter of 2024. This outpaces the level of completions a year ago, which stood at 84,830, by almost 70%. The level of multifamily units reaching completion has only continued to grow since the number of units under construction peaked at over one million in 2023.

Along with the three-month absorption rate and completions, SOMA reports absorption rates within six-months, nine-months, and 12-months of completion. Solely focusing on the 12-month absorption rate, it fell to its lowest level since the start of the pandemic, registering a rate of just 90%. This means that 10% of the 90,630 apartments completed in the fourth quarter of 2023 remain unoccupied. As completions have risen over the past year, the supply of available apartments has increased. Additionally, regional SOMA data points to the Northeast as a possible explanation for a lower 12-month absorption rate, as nearly 23% of the fourth quarter completions in 2023 remain unoccupied. This is well above any other region, with the Midwest at 7%, the South at 9% and the West at 5%.

Condominiums and Cooperative Units

The absorption rate for new condominiums and cooperative units fell to 63% for the quarter, down 1 percentage point from the previous quarter.

Total completions of new condominiums and cooperative units, according to the SOMA, fell over the quarter from 4,452 to 4,008. Quarterly completions of these units peaked in the second quarter of 2018, at 7,996 completions but have steadily fallen since.

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Mortgage Rates Ease Slightly in February Amid Economic Uncertainty

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Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.

The 10-year Treasury yield declined 11 bps to an average of 4.52% in February, reversing its recent upward trend. This shift reflects concerns over a weakening U.S. economy due to inflationary pressures and increasing geopolitical risks. In response, the markets anticipate that the Federal Reserve will resume rate cuts later in the year.

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Mortgage Rates Tick Upward in January

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Mortgage rates edged higher in January, with the average 30-year fixed-rate mortgage reaching 6.96%. Rates had been climbing steadily since mid-December—even surpassing 7%—before easing in recent weeks as the bond market stabilized following news that President Donald Trump postponed tariffs plans to February 1.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose 24 basis points (bps) from December, extending a two-year trend of fluctuations between 6% and 7%. Meanwhile, the 15-year fixed-rate mortgage increased 23 bps to land at 6.13%.

The 10-year Treasury yield, a key benchmark for mortgage rates, averaged 4.63% in November—33 basis points higher than December’s average. A strong economy, coupled with ongoing uncertainty over inflation due to tax cuts and tariffs, continues to put upward pressure on yields. This uncertainty is also reflected in the increased range for the projected 2025 core PCE inflation in the December FOMC economic projections, now estimated between 2.1% and 3.2%, compared to a narrower 2.1% to 2.5% range in September.

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Top Posts – Homeownership Rates of Family Households

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With the end of 2024 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In September, Catherine Koh dived into data on the homeownership rate of various household types including married couples with children, married couples with no children, single parents, and others.

The homeownership rate for multigenerational households increased by 4.9 percentage points (pp) over the last decade, but there’s another household type that experienced an even larger increase in the homeownership rate over the same period—single parent households.

In further analysis of the Census’s American Community Survey (ACS) data, NAHB dives deeper into the homeownership rate for other family household types: married couples with no children, married couples with children and single parent households. In 2022, most family households were married with no children (44%), followed by married with children (26%), single parents (12%), others (12%), and multigenerational families (6%). This composition has not changed much, with the exception of a gradual decrease in the share of married with children and single parent households, which is offset by an increase in the share of married with no children households.

The homeownership rate for single parent households saw the largest gains in homeownership rate with an increase of 5.7 percentage points over the decade. However, the overall level of homeownership rate for single parent households remains the lowest among all other family household types at just 41%.    Another group that saw a large increase was the married couple with children households, with a 4.5% increase over the decade from 73% to 78%. Like multigenerational households, these increases were spurred on by historically low mortgage rates in 2021.

The only household type to have plateaued was married without children. As a matter of fact, these households saw decreasing homeownership rates for a few years before creeping back up to be at roughly the same rate as they were ten years ago at 84%. Nonetheless, married without children households remain as the group with the highest homeownership rate with an average rate of 84% over the decade.

We also examined the estimated home price-to-income ratio (HPI) for various household types. To calculate the home prices for recent homebuyers we used the median property value for owners who moved into their property within the past year. Here is where we see the effect of how multigenerational households were able to lower their HPI with pooled income and budgets. In contrast are single parent households with their estimated home prices approaching five times their income, indicating that these households are significantly burdened by housing costs.   

Given that homeownership rates jumped in recent years for most household types despite increases in home prices suggests that the low mortgage rates in 2021 made steep home prices more palatable for homebuyers to enter the market. However, it is unlikely that we’ll see a continued increase in homeownership while mortgage rates remain elevated. 

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Mortgage Activity Declines in November as Rates Continue to Increase

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The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s (MBA) weekly survey, decreased 14.5%, month-over-month, in November on a seasonally adjusted (SA) basis. The slowdown in mortgage activity can be attributed to higher mortgage rates as the ten-year Treasury yield increased in November, reflecting uncertainties surrounding the elections.

The market decline was reflected primarily in the Refinance Index (SA), which decreased by 33.2% month-over-month. Meanwhile, the Purchase Index (SA) showed a modest increase of 2.7% over the same period. However, compared to October 2023, the Market Composite Index is up by 16.4%, with the Purchase Index seeing a slight 4.8% increase and the Refinance Index higher by 45.9%.

The average contract rate for 30-year fixed mortgage rate per the MBA survey for November averaged at 6.8%, 29 basis points (bps) higher month-over-month in response to a higher ten-year Treasury rate.

Loan size metrics also reflected market adjustments. The average loan size for the total market (including purchases and refinances) shrank 2.9% month-over-month on a non-seasonally adjusted (NSA) basis, decreasing from $389,800 to $378,400. Loan sizes for purchasing and refinancing decreased. Purchase loans averaged $436,200, down 2.7% from $448,300, while refinance loans saw a sharper 9.9% decrease, with the average loan size falling from $322,500 to $290,600. Adjustable-rate mortgages (ARMs) also declined 6.0%, from $1.15 million to $1.08 million.

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Credit Still Tight, But Builders Finally Get Some Relief from Interest Rates

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In the third quarter of 2024, borrowers and lenders agreed, as they have over most of the past three years, that credit for residential Land Acquisition, Development & Construction (AD&C) tightened. On the borrower’s side, the net easing index from NAHB’s survey on AD&C Financing posted a reading of -12.0 (the negative number indicates credit was tighter than in the previous quarter). On the lender’s side, the comparable net easing index based on the Federal Reserve’s survey of senior loan officers posted a similar reading of -14.8.  Although the additional net tightening was relatively mild in the third quarter (as indicated by negative numbers that were smaller, in absolute terms, than they had been at any time since 2022 Q1), both surveys indicate that credit has tightened for eleven consecutive quarters—so credit for AD&C must now be significantly tighter than it was in 2021.   

According to  NAHB’s survey, the most common ways in which lenders tightened in the third quarter were by lowering the loan-to-value (or loan-to-cost) ratio, and requiring personal guarantees or collateral not related to the project—each reported by 61% of builders and developers. After those two, reducing the amount lenders are willing to lend was in the third place, with 56%.

Additional information from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—is discussed in an earlier post.

Although the availability of credit for residential AD&C was tighter in the third quarter, builders and developers finally got some relief from the elevated cost of credit that has prevailed recently. In the third quarter, the contract interest rate decreased on all four categories of AD&C loans tracked in the NAHB survey. The average rate declined from 9.28% in 2024 Q2 to 8.50% on loans for land acquisition, from 9.05% to 8.83% on loans for land development, from 8.98% to 8.54% on loans for speculative single-family construction, and from 8.55% to 8.11% on loans for pre-sold single-family construction.

More detail on credit conditions for builders and developers is available on NAHB’s AD&C Financing Survey web page.

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Mortgage Rates Rise in November Amid Post-Election Market Volatility

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Mortgage rates climbed in November, driven by market volatility and a surge in Treasury yields following the recent elections. On the day after the election results, the 10-year Treasury yield spiked by 14 basis points (bps), setting the stage for further rate increases throughout the month.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage increased 38 basis points from October, reaching 6.81%. Meanwhile, the 15-year fixed-rate mortgage saw an even steeper increase of 43 bps to land at 6.03%.

The 10-year Treasury yield, a key benchmark for mortgage rates, averaged 4.37% in November—38 bps higher than October’s average. This increase reflected heightened market uncertainty and persistent volatility. Looking ahead, the Federal Reserve is set to meet on December 17-18 to evaluate the possibility of another rate cut. Since the federal funds rate influences interest rates, a rate cut could potentially ease long-term mortgage rates, but this decision will hinge on the latest employment and inflation data, and other macroeconomic factors that could have an upward pressure on inflation including larger government deficits and higher tariffs. NAHB forecasts additional declines to the federal funds rate into a range below 4%.

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